Why Does Ukraine Matter to the EU?

By Olga Shumylo-Tapiola

Some adults turn their noses up at the question of “why,” believing it to be childish. And when it comes to the EU’s foreign policy, especially in its Eastern neighborhood, the question is considered simply inappropriate. That the EU will engage with its Eastern neighbors is just a given today. Take Ukraine. The EU has made a significant political investment in Kyiv over the years but has not given much thought to why Ukraine matters.

Yet, the EU should take a strategic pause and ask this question. Brussels’s policy and the instruments it has used have had little impact on Ukraine. The country is moving further away from the EU and into a gray zone of no reform. Many in the union are frustrated with Kyiv and wonder why they should be more pro-Ukrainian than the Ukrainians themselves. Or why they have to save Ukrainians from bad leadership or from Russia.

Still, the EU as a whole is not asking the fundamental question and is sticking to its current policy despite all the worrying signs.

By ignoring reality, the EU is setting itself up for a big disappointment and running the risk of limiting its policy options to disengagement. A real discussion of the EU’s interests in Ukraine that moves beyond generalities may help member states avoid further frustrations and help the EU get more out of its relations with Kyiv.

THE EU FOREIGN POLICY RADAR SCREEN

Ukraine was largely invisible to the EU in the first decade of its independence. Relations were based on the vague EU-Ukraine Partnership and Cooperation Agreement of 1998 (similar accords were offered to all post-Soviet states). None of the then fifteen EU members at the time saw Ukraine as a priority. It was too far away from the EU, too difficult to understand, and too close to Russia.

Ukraine appeared on the EU’s political radar screen with the 2004 enlargement. Especially after Ukraine’s 2004 Orange Revolution brought a pro-Western, democratic-leaning government to power, the EU was forced to think about a special policy for Ukraine. The country seemed like it was the next Poland, which joined the EU in 2004 after significant reforms. Responding to Kyiv’s European agenda and helping it reform became natural for many in the EU. Ukraine was offered “all but institutions”—the chance to access the EU’s internal market after significant reform—within the newly launched European Neighborhood Policy and further Eastern Partnership initiative (EaP).

The EU could take that approach as long as Kyiv appeared intent on reform. But there was a serious democratic regress in Ukraine caused by the leadership’s massive power- and asset-grabbing. This change of course during the presidency of Viktor Yanukovych revealed a Ukraine that was not ready to seriously reform. This was not a Poland that would do everything possible to get back home to Europe.

The EU initialed the Association Agreement with Ukraine, but full signing of the accord was put on hold until things started changing for the better. If Ukraine does not fulfill the EU’s conditions over a certain period of time—which include addressing the issues of selective justice, reforming its electoral legislation, and conducting a number of reforms within the Association Agenda—the agreement may be shelved and Ukraine may start slowly disappearing from the EU’s strategic map.

THE EU’S INTERESTS IN UKRAINE—DRIVEN BY MEMBER STATES

EU foreign policy is too young, and Brussels’s role as a leader in strategic thinking is still weak. Many policy decisions are very much driven by individual member states and their often divergent national interests.

The member states did not engage in much debate about Ukraine’s importance. According to the 2003 European security strategy, which aimed to build a ring of well-governed states around the union, Ukraine had some sort of role to play. This was a lowest-common-denominator strategy, in which Ukraine was put in a basket with other EU neighbors and expected to become a well-governed democracy and market economy on the EU’s border. And that made it a safe bet for securing an EU-wide consensus.

However, that was where the similarity of positions ended. Deciding why to actually interact with Ukraine was left to each member state and depended on the state’s location in Europe, historical experience, and national interests.

The EU member states initially formed two groups vis-à-vis Ukraine—the idealistic activists and pragmatic conservatives.

Idealistic Activists

The Central and Eastern European states that joined the EU with the 2004 and 2007 enlargements, especially Poland, interpreted the lowest common denominator as an open-door policy. Ukraine was important for creating the Europe these idealistic activists wanted.

They had a common history with Ukraine, and their populations included large communities of Ukrainian migrants. They felt obliged—as Germany once felt with Poland—to do good and to lend a hand to help Ukraine weather painful reforms. This view was strongly supported by their societies. Pragmatic calculations were secondary, though geographical and linguistic proximity meant that Ukraine’s market did present many opportunities to these states. They advocated for the EU to give Ukraine a membership perspective and for the Association Agreement to be signed quickly as a step toward membership.

These idealistic activists were later supported by a few old member states, like Sweden and Finland, and many in the European Parliament, the European Commission, and the newly formed European External Action Service.

Yet, the group split over the presidency of Viktor Yanukovych, when Ukraine turned away from democratic reform.

One faction, led by Poland and Lithuania, continued pushing for the agreement to be signed unconditionally. Their stance was driven by a fear of Russia, and, in particular, the fear that if Ukraine were not in the process of integrating with the EU, it could be more easily drawn into the Russia-led Eurasian Customs Union. Keeping Ukraine in the EU’s orbit through the Association Agreement was seen as a way of keeping Russia away from the EU’s (read: Poland’s) borders. This faction felt obliged to press the rest of the EU to not give up on Ukraine despite negative developments on the ground.

The other faction (essentially, all of the idealistic activists but Poland and Lithuania) still wanted to help Ukraine but needed to see signs of genuine interest in reform and shared values from Kyiv. They supported signing the Association Agreement with Kyiv only after the Ukraine had met all the preconditions.

Growing disappointment with Yanukovych after endless failed attempts to reach out to him turned even the last do-gooders away from idealism. Talking about Ukraine became emotionally difficult, and these states did not see much sense in pushing the rest of the EU toward signing the agreement at any cost. They had other, more important issues to talk about with the heavyweights like Germany and France. Wasting political capital on Ukraine, even given the Russia factor, no longer seemed worth it.

Pragmatic Conservatives

A conservative group consisting mainly of older member states sat opposite the idealists. They were the closest it got to the lowest-common-denominator position. This group felt no historical connection to Ukraine and no obligation to help it reform. Some of these member states were simply geographically too far away from Ukraine. And for many of them, Kyiv was still legitimately in Moscow’s orbit.

This group saw the 2004 and 2007 enlargements as necessary but also as defining the EU’s external borders. Any further Eastern enlargement was seen as a weakening of the union and a dilution of European integration. These countries’ interest in Ukraine was rather selfishly straightforward—they wanted a stable, well-governed, democratic country that was friendly to the EU. These states also had an interest in Ukraine’s market, but it mattered just as much as any other big market outside the EU.

They did not object to engagement with Ukraine, but they thought the country should be kept at arm’s length and that engagement should take place on the EU’s terms. That meant Ukraine had to first do all the necessary hard work, and only then could it enjoy any possible benefits from proximity to the EU. Their line has always been clear: Ukraine had to reform to prove it deserved to get closer to the EU.

They opposed offering the carrot of membership to Ukraine, even in the immediate aftermath of the Orange Revolution when public opinion of Ukraine in those countries was relatively positive. The furthest they agreed to go was to launch talks on the Association Agreement.

For this group, Yanukovych’s presidency underlined the need for the EU to think about its values. These states insisted that Kyiv had to fulfill the EU’s conditions before the Association Agreement could be signed. Their tactical interest shifted. They put rapprochement with Ukraine—a country whose leadership acted against European values—on hold.

Idealists and Pragmatists Unite

The positions of all member states are now coalescing around the vision of waiting for the situation on the ground to improve while keeping the option of signing the agreement open. They primarily seek not to promote European values in Ukraine but to ensure that the EU does not compromise its own values because of the geopolitical fears of certain EU member states. Some idealists are still trying to influence the situation on the ground, but even their hopes are bound to eventually fade.

WHAT UKRAINE MEANS FOR THE EU TODAY

Alas, the EU debate on Ukraine is rarely about Ukraine itself or the EU’s interests there. Instead, it is primarily about EU enlargement or Russia. On both issues, the positions of EU member states are irreconcilable. These issues are wrapped up with so much emotion and fear that the member states cannot talk about their foreign policy interests with respect to Ukraine in an objective way. But Ukraine is significant for the entire EU (EU27) in terms of political stability, security, and energy-related matters.

Politics and Security

Today’s Ukraine poses a security threat to the EU. It is not building a nuclear bomb, it is not capable of starting a war with its neighbors, and it cannot launch a new Cold War with the West. But Ukraine’s poor governance, which has been further degraded by Yanukovych’s presidency, may potentially lead to instability and public (possibly violent) discontent that could negatively affect the EU. At the least, it may significantly increase the flow of migrants from Ukraine, which is already ranked fifth among non-EU suppliers of migrants to the EU27.

Ukraine’s democratic decline also has a negative impact on Eastern Europe and sends negative signals to the other EaP countries (Armenia, Azerbaijan, Belarus, Georgia, and Moldova). For years, Kyiv was a role model for the EU’s EaP, and it remains a key partner in the initiative. The Association Agreements with Moldova, Georgia, and Armenia were modeled on the EU’s accord with Ukraine. A declining Ukraine casts a long shadow over the Eastern Partnership and undermines its value for the entire region.

Kyiv is an important actor in the “5+2” talks on the conflict between neighboring Moldova and the country’s breakaway region of Transnistria as well. For a long time, Ukraine aligned with the EU and proved to be an important partner for Brussels on this issue. However, Ukraine under Yanukovych is more vulnerable to external (that is, Russian) pressure and may eventually change its approach to Transnistria.

Economics and Trade

Of the EU’s Eastern neighbors, Ukraine is the country with the second-largest joint border with the EU at over 1,300 kilometers (or 800 miles). In 2011, Ukraine was the union’s 24th most important source of imports (accounting for 0.9 percent of imports from non-EU countries) and ranked nineteen on the list of countries receiving the most EU exports (accounting for 1.4 percent of EU exports). This compares with Russia, which is the EU’s second-largest import partner and fourth-largest export partner, and Turkey, which is seventh and fifth, respectively.

The potential for greater economic and trade links between the EU and Ukraine is significant. Ukraine offers a market of 45 million consumers, and 70 percent of its arable land is made up of some of the most fertile soil in Europe. But for this potential to be realized, and for EU businesses to be willing to invest in or trade with Ukraine, the country has to dramatically improve its poor business climate. It currently ranks 137 out of 185 countries in terms of the ease of doing business according to the World Bank’s Doing Business 2013 report and 73 out of 144 countries on the World Economic Forum’s Global Competitiveness Report 2012–2013.

Energy

Despite Russia’s attempts to redirect its gas supply to the EU through the Belarusian gas transit system and Nord Stream pipeline, Ukraine remains the most important transit country for Russian gas going to the EU. Today, twelve EU member states receive gas through the Ukrainian transit system,1 which is in relatively bad shape and needs to be significantly modernized.

Yet, the Ukrainian authorities have not asked the EU for the funds that were pledged by Brussels in 2009 to help modernize the system. The Ukrainian government is also reportedly holding negotiations with Moscow on the creation of a bilateral consortium to manage the Ukrainian gas transit system. While this may provide for the safe transit of gas to the EU in the short run, it does not guarantee modernization and hence security of transit for the EU in the medium term.

Ukraine also offers energy resources that the EU needs. It is one of the biggest producers of electricity in Europe. Its electricity systems are partially integrated with the European Network of Transmission System Operators for Electricity, and the country supplies electricity to four EU member states (Hungary, Slovakia, Poland, and Romania). In addition, Ukraine has significant natural gas and shale gas resources that it is starting to develop.

The Russia Factor

Russia appears to be an unavoidable piece of the puzzle. When it comes to the common neighborhood, the EU looks as if it is competing with Moscow for spheres of influence. While the EU is neither willing to nor capable of playing this game, Moscow is. A badly governed Ukraine—that is, one that is corrupt and undemocratic—is more vulnerable to Moscow’s pressure and thus has more chance of being absorbed by the Eurasian Customs Union over time. While this does not confront the EU with hard security threats, it may complicate trade and other relations with Ukraine.

WHAT SHOULD THE EU DO?

The question of Ukraine’s relevance would not be asked if the country were consolidating its democracy and transitioning to a market economy. The question then would be how to help Ukraine reform in the most efficient way. The EU’s lowest-common-denominator approach would probably be enough, and the Association Agreement coupled with financial support could be the natural instrument for assisting Ukraine.

But today’s Ukraine is a mixed bag for EU members. Kyiv does not want to reform, and the Ukrainian leadership has taken numerous steps that move the country further away from the EU. In its current shape, Ukraine seems to matter only because of its size, its geographical proximity to the EU, and the host negative, problematic agenda items that it brings to the table. It has long had positive potential, but realizing that potential, especially in terms of economics and trade, is prohibitively expensive, and the EU has more to gain from engagement with other countries, such as Russia or Turkey.

The EU’s natural approach is most likely to wait for the situation in Ukraine to improve. Over time, the EU may consider a policy of containing Kyiv. But that would make the EU a mere observer of developments in the region and would go against the EU’s interest of building a stable and well-governed neighborhood, a goal that is still very valid. Therefore, continued engagement with Ukraine is key. However, the EU may need to reconsider a few things to be more successful in its endeavor.

EU member states should agree to pause the EU enlargement debate and deliver a clear message to Ukraine.The sad truth is that the EU does not have the institutional capacity or will to enlarge beyond a few Balkan countries. It is also clear that the enlargement carrot will not work in Ukraine as it did in Poland. Erasing the issue of enlargement from the Ukraine debate will help the EU be more pragmatic and less emotional about Ukraine. It will tame Kyiv’s bloated sense of self-importance and help it understand Ukraine’s interest-based relevance for the EU27.

The EU should end its unnecessary rhetoric about competition over Ukraine with Russia. Toning down the rhetoric does not mean that the EU is giving Ukraine away to the Eurasian Customs Union. Rather, it means stopping Kyiv from playing Brussels against Moscow and letting Ukraine decide its direction independently. Brussels should remain open to signing the Association Agreement if Kyiv shows signs of real interest in such a relationship. Such a move would also reinforce the value of what the EU has to offer rather than fueling comparisons with Russia.

EU member states should also discuss EU27 interests in Ukraine and find relevant instruments for engaging with Kyiv. Today’s EU is better equipped for this discussion than it has been in the past. There are fewer illusions about Ukraine, and the EU is no longer afraid of losing the country.

The EU’s primary interest in Ukraine is putting an end to the negative agenda. While the EU’s general objective toward Kyiv may remain, the EU will have to rethink its instruments of engagement. Democracy is a bottom-up process, as recent events in the Arab world have demonstrated. The EU cannot impose it from above. Brussels should gradually engage in comprehensive outreach to the grass roots—a process that is not well-known to the EU. Tripling the number of scholarships for Ukrainian students of all levels and increasing the number of possibilities for professional training and exchange beyond government officials coupled with support for grassroots movements will be key. Providing visa-free travel to the EU for ordinary Ukrainians can help significantly facilitate the learning process and may contribute to change in Ukraine.

This is a long-term investment that will require creative solutions from the EU to overcome Ukraine’s rather messy politics. However, it is clearly in the EU’s strategic interest. Once the EU27’s interests in Ukraine are clarified and its instruments have been fine-tuned, member states can move on to discussing the relevance of and approach to the entire Eastern Partnership region.